2 Answers
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Yes, as is now disclosed in the location database kerfuffle, iOS will cache wifi and cell tower location near it's location so that when internet access is temporarily unavailable, the device can still trilaterate based on what the WiFi receiver is seeing for SSID.

So, I have had my non 3G iPad correctly locate itself driving down the highway 50 miles from where it last had a WiFi connection. If I have purchased any map product that stores it's own map tiles, it would work. Even the built in map program caches tiles, so I would generate driving directions and step through all the turns to download the map tiles along the way on the device. As long as the device doesn't quit that app / purge those downloaded tiles, the built in map works well for me without 3G data.

Of course, you don't have actual control over downloading a region of tiles or controlling which wifi hotspots are downloaded into the system cache. Also - this means if you are outside the range of any WiFi signal (or the ones that are nearby are not mapped in the database) - your device is clueless at to it's location.

Basically, the hardware limits the ability to use GPS and cellular data and maps are not further handicapped just because a non-3G iPad has less connectivity. Pick the app you like and see how it works in your enviroment. You can always add external GPS input if you can't sell and re-buy a new iPad for less than the cost of an external receiver.